20th Anniversary Special Feature: the rise of Asia

There is no doubt that the shift of pharmaceutical business is tilting towards Asia. With the industry growing at high speed, Asia is being hailed as 'the pharmaceutical hub', and most multinational and domestic companies in the region believe it is inevitable that Asia will soon be leading the pharma market.

Two decades ago, the industry was strongly affected by intellectual property rights issues, insufficient infrastructure and a lack of a 'think big' approach and proactiveness. Additionally, Asian industry leaders mainly focused on domestic business; a factor that, combined with a poor talent pool, affected industry growth. Only multinational companies (MNCs) were able to succeed in the market and more than 70% of the country's business was in their hands.

Many changes have helped the the Asian pharmaceutical industry become a global leader such as improved business acumen; a thirst for merger and acquisitions, and in-licensing/out-licensing deals; the establishment of partnerships; a focus on R&D innovations; greater financial support; new marketing strategies; and support from regulators to improve consistency in manufacturing. These changes altered the volume of business from a few hundred million Euro to billions.

The future

India, China and Singapore are expected to become leaders in the pharmaceutical sector. India and China have become major suppliers of APIs, with India also exporting high volumes of pharmaceutical dosage products. South Korea, Malaysia, Thailand, Taiwan and Hong Kong are also creating strong pharmaceutical bases, although these markets are mainly dominated by MNCs. More clinical trials are also being conducted in Asia and India has taken the lead in clinical trial outsourcing. Asia is now returning to GDP levels of the 19th century when it was at its highest (12%). According to Goldman Sachs, India is expected to become the world's third largest economy by 2050. Many MNCs are investing and building their businesses in China and India, and it is expected that total pharmaceutical sales in China (at current levels of approximately $14 billion [€9 billion]) will double to $28 billion (€18 billion) by 2010.(1)

In late 2006, Novartis (Switzerland) announced a $100 million (€64.2 million) investment in Shanghai for a new R&D centre. AstraZeneca (UK) also has plans to invest approximately $100 million (€64.3 million) in China by 2009 for R&D operations. Other MNCs, including Pfizer (NY, USA), Roche (France) and Bayer (Germany) are investing in existing or new facilities in China. DSM (The Netherlands) has joint venture with North China Pharma Group with more than $100 million (€64.3 million) investment. As far as domestic companies are concerned, the Chinese government is taking the necessary steps to boost their business, such as strengthening regulatory compliances.

And China is not the only one experiencing new growth; in India, sales increased by approximately 18% to $8 billion (€5.1 billion) in 2006, according to a survey by IMS Health,(1) and by 2010 the Indian clinical trials market is expected to be worth $1 billion (€642 million) from a current level of approximately $150 million (€96 million). Also by 2010, contract manufacturing is expected to rise to $1 billion (€642 million) from a current level of approximately $350 million (€225 million).

The population factor

One of the key reasons for this development is Asia's large population, combined with the increasing percentage of the aged, better infrastructure in terms of facilities, hospitals and skills, as well as government support for healthcare R&D. Other major changes in the Asian market are the increased medical insurance coverage of the population, the growing popularity of the internet and the option of home delivery of medicines, intensifying local competition and an increasing number of research centres in Asia.

Consumer confidence is also on the rise with China's entry into the World Trade Organization, as well as a reform of both the financing and the delivery of the healthcare system.(2) Continued price declines are expected, but this will be outweighed by strong volume growth. China is considered to be ahead of other major countries, such as India, Singapore, South Korea and Thailand, with the establishment of the Gene Valley in Shanghai, which is expected to become the second Silicon Valley in biotechnology research. However, the problem of counterfeit drugs in China continues at epidemic proportions.The Indian pharmaceutical industry is one of the world's largest; ranking fourth in volume and thirteenth in value in the global pharmaceutical market.

In 2005, domestic pharmaceutical sales were $4.5 billion (€2.9 billion) and growing at a compound annual rate of 8.59%. The leading Indian pharmaceutical companies have become some of the most efficient manufacturing units in the world as they are approved by international regulatory agencies, such as FDA and the UK's Medicines and Healthcare Regulatory Agency, and India now has the highest number of US FDA-certified manufacturing facilities outside the US. There is an increasing number of opportunities with large Indian manufacturers and CMOs for the increasingly cost-conscious MNCs.

One major factor that has increased the confidence of foreign MNCs searching for opportunities in India is the adoption of a new product patent regime in January 2005. This facilitates concurrent global Phase II and III clinical trials and has changed the dynamics of the Indian pharmaceuticals industry. Several leading domestic producers have begun to conduct research into new chemical entities and novel drug delivery systems as they can patent the innovation and get protected from copying.

The Indian government is also giving the biotechnology sector a big push by establishing a comprehensive national biotechnology policy. Biotechnology in India is developing in cluster zones that have reputable and established public life science research institutes at their centres. Various state governments are individually establishing their own biotechnology policies and are actively setting up biotechnology parks to facilitate research in new therapeutic options using cutting-edge technology. Biocon, Shanta Biotech, Serum Institute, Reliance Bio-Pharma/Life Sciences and others are taking big steps in biotech areas by forming their own biotechnology parks, bringing back the Indian talent pool from overseas and providing better facilities.

Clinical trials

India is fast becoming a desirable clinical trial destination because of:

• Favourable regulatory environment and government support.
• Ease of patient availability.
• Low operational costs.
• Compliance to ICH-GCP guidelines.
• Qualified and knowledgeable investigators.
• State-of-the-art equipment.
• Capability in clinical trial data analysis.
• Knowledge of regulatory requirements.

Approximately 40% of MNCs operating in India are either conducting or planning to conduct clinical trials in the country. Many big CROs, such as Quintiles (NC, USA), have established offices in India to take advantage of the positive environment. However, lack of data exclusivity seems to be the main hurdle for continued growth of the clinical trials sector.

India's well-established competencies in computer science and software, as well as a large pool of trained professionals in life sciences, are the foundations of a flourishing bioinformatics industry in India. Global pharmaceutical and biotechnology companies have the opportunity to outsource services to the Indian bioinformatics industry, as well as source specialized software tools and databases from these companies.

R&D innovation

India is becoming an increasingly attractive destination for R&D activities because of a variety of factors, including changing intellectual property and patent laws, favourable cost/skill ratios and the past success of outsourcing in the IT field. These factors have created compelling business opportunities for Indian companies in pharmaceutical R&D. Global pharmaceutical companies can exploit this opportunity by having an innovative approach.India has the fourth largest reservoir of scientific personnel and the second largest reservoir of English speaking scientists. India annually produces 3 million graduates per year, and approximately 2 million of these are science graduates and IT engineers. This has led some people to classify India as a knowledge superpower. China is also making every effort to become a knowledge superpower by initiating various programmes at school and college levels.

Both countries have tremendous potential to do even better in the future. Privatization in the last decade has led to remarkable growth in the Asian region. Asia already offers high-quality healthcare treatments of international standard and will continue to provide low-cost medical treatment.

Generics companies

Approximately 25% of abbreviated new drug applications (ANDAs) in the US are filed by Indian companies. Some Indian companies, such as Ranbaxy Laboratories, are ranked among the top 10 generic companies and topmost in filing ANDAs in the US. As aforementioned, India has the highest numbers of US FDA-approved manufacturing facilities after the US.

According to Professor C.K. Prahalad, a renown management guru from the University of Michigan (MI, USA), Indian companies are now becoming global companies as they seek to expand their operations across the globe. He predicts that India will be shaping the world order by 2022 as it will be in a position to design global policies. He outlined six areas of opportunities for India: R&D innovation; laboratory of the world to work-outsourcing; cost-effective operations; strong intellectual property rights; biosimilar generics; and a strong knowledge advantage. More importantly, he sees India as a 'crucible of innovation' or a 'laboratory for the world.'

Generic drug companies are now moving towards the production of biosimilars, which are cost-effective and in demand all over the globe. With biotechs accounting for approximately 10% of the $640 billion (€411 billion) world pharmaceutical market, and increasing at a rate of 17% per annum, the market for biosimilars is growing.

The biotechnology market is also developing at high speed. Countries such as Japan, Malaysia, Singapore, South Korea and Thailand have also established biotechnology.

Cost advantages

Many countries in Asia offer cost advantages to the pharma industry and India is, again, leading in this area. The main benefit comes from the cost of innovation. It is generally accepted that the cost of R&D in India is one sixth of that in Europe and the US. To date, major MNCs are struggling to form a strong R&D pipeline. In the 1990s, the industry used to discover approximately 40 new molecules a year, a value which has now dropped to 20, with R&D expenditure doubling in the same period.(3) By 2009 the generic market is expected to grow to $27 billion from $15 billion in 2004, while the global market will grow to $94 billion.(3)

Regulatory support

Regulatory authorities across the globe are continuously supporting the pharmaceutical industry. They have helped by introducing initiatives such as PAT and quality risk management. These help the industry to comply with regulatory requirements and ensure quality, efficacy and safety of products.The industry must take maximum advantage from these techniques.

Future strategies

So what must the future strategies be to sustain the Asian market?

• Continue to have a strong knowledge base.
• Encourage increases in number of pharmaceutical graduates every year.
• Strengthen intellectual property protection.
• Ensure regulatory compliance.
• Initiate a right first time and every time approach.
• Focus on quality of operations.
• Remember that patient's safety is key.
• Cost-effective operational excellence.
• Manage pricing pressures and shrinking margins.
• Be Innovative in R&D and enhance productivity.
• More realistic clinical trials will ensure safety of products.
• Be transparent in data generation.
• Realize the tangible value from strategic alliances, joint ventures, and mergers and acquisitions.
• Speed is important.

Conclusion

The Asian market will continue to lead the global market in the future with its cost-effective operations, knowledge base, innovative R&D and strong will power to grow. Asia provides economical operations, an abundant patient population, a large pool of physicians/scientists/pharmacy graduates and very attractive outsourcing opportunities.

In an interview with Pharmaceutical Technologist I said that change is good; it makes us stir the self-development pot a little faster. In other words, if there is no change then there is no transformation. Change is always challenging and that is why our pharmaceutical industry is accepting the changes, growing and surviving.

I do not have any doubts that Asia will be the future of pharmaceutical business and will continue to lead the globe.

References

1. Gearing up for a global gravity shift (PricewaterhouseCoopers, July 2007)

2. www.china.org.cn

3. B. Tempest, Journal of Generic Medicines, 4(1), 37–42 (2006).

Ranjit Barshikar

is a GMP/Quality Consultant and former Vice President of Global Quality for Ranbaxy Laboratories (India).

The interview with Ranjit Barshikar titled Changing times is available in Pharmaceutical Technologist.